What transfer tax hikes would mean for Chicago buyers

by Emily Mack

To fund anti-homelessness efforts, the city of Chicago may triple the transfer taxes levied on expensive Chicago properties. Such action would directly affect both residential and commercial buyers — but the real estate community has yet to mobilize around the issue.

The proposal: Bring Chicago Home

In Chicago in 2019, an estimated 58,273 people were experiencing homelessness. And while the extent of the pandemic’s effect on homelessness is still unclear, the last few months have seen a stronger push for the creation of affordable housing.

Local activists are calling to increase the city’s Real Estate Transfer Tax (RETT) on property sales higher than $1 million in order to pay for the building and preservation of public housing, among other initiatives. And that increase would be steep. The coalition, officially called Bring Chicago Home, aims to raise the RETT by 1.9%: roughly three times the current figure.

Support for Bring Chicago Home is now widespread. The possibility of an advisory referendum regarding RETT is officially on the table and, according to Crain’s Chicago Business, the number of aldermen supporting the measure has doubled since April. Come fall, it could very well appear on the ballot. And while an advisory referendum would not necessarily result in legal action, its outcome would determine where the city, as a whole, stands on the matter.

So, where do agents stand?

Opposition to the measure

Estimates for what Bring Chicago Home’s proposal would add to the costs of million-dollar-plus properties ranges from $158 million to $163 million … the burden of which would fall on buyers. While sellers would see no change, the RETT revision would roughly triple the buyer’s tax to $26,500 per $1 million spent. Naturally, that will affect the agents overseeing such pricey transactions.

In Los Angeles, real estate groups are currently fighting similar legislation. However, the Chicago Association of REALTORS® (CAR) has refrained from campaigning against the potential referendum. At least, so far.

Speaking to Crain’s, CAR’s Vice President of Government Affairs Kris Anderson said that the group is waiting to mobilize until the city council formally considers the proposal. And that may take some time; the measure is not yet scheduled on the upcoming July agenda. But Anderson did share that he is prepared to “activate our 17,000 members against this” at any time.

Mario Greco, a luxury agent with Berkshire Hathaway HomeServices, also spoke to Crain’s about the proposal. Although it would certainly alter the prospects for semi-high-income homebuyers, he pointed out that many will simply bear it. “You might hear some vocal opposition,” Greco told Crain’s, “But probably not in this city that’s used to being pummeled with fees and taxes. If you love this city, you might put up with another tax.”

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